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Registered capital is the initial invested amount required by the Chinese government for foreign investors to establish a Wholly Foreign Owned Enterprise (WFOE) in China , the amount will be kept in the company account to use to run the business until it can break even - the 'registered capital' is a guideline only. If the initial registered capital is not enough to keep business running before it generates its own income, which will lead to increased costs in reapplying for permission to increase capital, additional licensing fees and renewals of business licenses and so on. The WFOE needs funding via it's registered capital until it's about to support itself from it's own cash flow.
However the amount of registered capital is dependent upon factors like Scope of Business and Location. In reality local authorities will review the feasibility study report (and check the lease contract) approve the investment on a case-by-case basis; reduced registered capital could be negotiated in some cases.
The minimum registered capital guides for various industries according to our practice in China, for instance Beijing, Shanghai, Guangzhou, Shenzhen are given below:
Consulting WOFE--- RMB 500,000/USD 70,000
Trading WOFE/FICE ---RMB 500,000/USD 70,000
Manufacturing WOFE---RMB 1million /USD 140,000
Article by Jack Wu (Zetland China)
For more information, please contact intray@zetland.biz
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